Budget 2010: View from Wales

When Alistair Darling makes his budget speech to Parliament, he will do so with the Welsh Economy in a particularly vulnerable position. Last week, Left Foot Forward reported on work undertaken by the Welsh Audit Office warning public services in Wales to undertake major reforms to address the “significant pain” that would be felt as a result of budget cuts which could total £1.5 billion over three years.

This will be particularly painful given that Wales has close to a quarter of its entire population employed by the public sector. Coupled with the warnings over future prospects for public services, last week’s figures on jobs showed that Wales continued to have the highest rates of unemployment across the UK, increasing by 9.2 per cent over the last three months.

These numbers have been particularly poignant given the news Toyota is to cut 150 jobs at its plant in Deeside and Bosch confirming it will close its South Wales Factory, with the loss of 900 jobs. Last year, a report by Gerald Holtham warned Wales could be underfunded to the tune of £8.5billion over the next ten years without reforms to the Barnett Formula.

With such a picture in mind, the Chancellor is facing mixed pressures ahead of the budget. Plaid Cymru have made clear their opposition to any cuts that could have a serious impact on Wales, MP Hywel Williams saying:

“We are the only party which seems to be taking this issue of cuts to Welsh public services seriously – none of the other parties have even estimated the cuts to the Welsh budget, which includes health and education.

“We recognise that there will be swingeing cuts from either a Labour or Conservative government at Westminster. Plaid Cymru are calling for cuts to be held off until there is clear and sustained economic growth over several quarters.

“Spending is already being squeezed and to cut by more would endanger growth and send us back into a recession – or perhaps a depression.”

Plaid have also called for a fairer funding formula to cover the UK block grant to Cardiff Bay. In contrast, business organisations have sounded a much more hawkish note, calling for a clear plan to reduce the budget deficit now, the director of CBI Wales David Rosser explaining:

“An earlier target for restoring budget balance would send a powerful message to investors about the seriousness with which the UK is tackling the public finances. We believe this could be achieved through a combination of lower overall spending and radical public service reform, rather than tax increases at a time when business and consumers are still struggling.”

“We will not put at risk the recovery from the global recession and we will go that extra mile to help families, businesses and communities across Wales.”

And the Conservatives? The only thing shadow Welsh secretary Cheryl Gillan could say was Wales “cannot afford another five years of Gordon Brown”. Given the fragility of its economy, all eyes will be looking to Wednesday’s budget for measures to provide a much needed boost to a recovery which is struggling to take off in Wales.